Broker Radar for August 21

Credit Suisse on Avenue Supermarts:

Initiated ‘Underperform’ with a price target of Rs1,150.

Very well-run business with a proven track record.

Store expansion to keep margins capped.

Food & grocery retailing is a tough business and valuations need to account the same.

Valuations are factoring in a bull case scenario with low margin for safety.

Current price implies 40% organised retail market share for DMART by March 2040, which is highly unlikely.

BofAML on Tech Mahindra:

Upgraded to ‘Buy’ From ‘Underperform’; raised price target to Rs800 from Rs600.

Telecom revival to boost both top-line & margin outlook.

Expect operating profit to grow at a compounded annual growth rate of 18 percent over FY18-21.

Such growth to provide more qualitative stock rally.

UBS on Tata Motors:

Maintained ‘Neutral’; cut price target to Rs280 from Rs370.

Deterioration in JLR performance is likely to result in rapid re-leveraging.

Risk-reward not compelling as JLR vol growth falters and negative FCF expands.

Domestic business improving but profitability could peak in the next financial year.

UBS on Federal Bank:

Maintained ‘Buy’; cut price target to Rs105 from Rs115.

Flooding in Kerala could impact repayments; 25% of the loan book from Kerala.

Target cut to factor in higher credit cost.

Maintain Buy due to inexpensive valuation.

Macquarie on Asian Paints:

Maintained ‘Neutral’ with a price target of Rs1,300.

GST cut to aid premiumisation and growth in the medium term.

Rising input prices will weigh on margin in the near term.

Like dominant position in Indian paint sector; Advise long-term investors to buy on dips.

Deutsche Bank on Indian Real Estate:

Worst of demand slowdown has passed.

Pace of industry consolidation has accelerated.

Margins unlikely to see further compression.

Expect cash flow momentum to improve in coming quarters.

Top picks are: Sobha, Godrej Properties and Oberoi Realty.

Deutsche Bank on NTPC:

Maintained ‘Buy’ with a price target of Rs200.

Near-term issues undermine attractive stock valuations & medium-term story.

Strong potential of two times and 2.3 times growth in regulated equity and profit respectively by March 2022.

Scenario analysis on Tariff Regulations suggest more positives than negatives.

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